Changes in rules make it difficult for importers to enjoy duty benefit

Importers are facing difficulty in availing duty benefit under the South Asian Free Trade Area after a recent change in rules that are compelling them to offer the hard copy of a key trade document or a bank guarantee to qualify.

The Safta agreement, which came into force in January 2006, has a common rule of origin to determine the eligibility of a country for the preferential tariff treatment.

The customs authorities in Bangladesh relaxed the rules on the submission of the certificate of origin (CoO) for the import of raw material under the Safta because of the pandemic. The decision on the acceptance of the electronic copy was taken at a meeting of the commerce ministers of the Saarc countries in April. 

In a circular on July 29, the National Board of Revenue said it would accept the electronic copy of the CoO in absence of paper documents and the benefit will remain effective until December 31. 

Accordingly, the customs authorities started accepting electronically issued CoOs from May. But on September 29, the customs authorities issued another circular, saying the importers would have to provide bank guarantee along with the electronic copy of the CoO to be eligible for the duty benefit if they cannot manage the hard copy.

The decision came at a time when normalcy has not returned to international trade as the pandemic is still wreaking havoc across the globe.

Mohammed Amirul Haque, managing director of Premier Cement, said his company faced trouble in submitting the hard copy of the CoO to qualify for the duty benefit while importing fly ash from India.

He said due to the pandemic, India has stopped issuing the hard copies of certificate of origin for exports from April. Instead, it is providing an electronic certificate.

"We will suffer financially if we have to pay the 5 per cent customs duty."

It would also be difficult to provide a bank guarantee for each consignment as importers would have to spend an extra in the form of margins and commissions to secure bank guarantee, he said. 

"It is also time-consuming," said the entrepreneur, calling on the government to reconsider the decision.

Bangladesh imports 6.5 million tonnes of fly ash from India per year.

Abdul Matlub Ahmed, president of the India-Bangladesh Chamber of Commerce and Industry, said if Bangladesh does not accept the electronic copy of the CoO, India will not accept it either.

As a result, traders will not receive the duty benefit and will have to pay an extra custom duty instead, he said. 

Importers are also facing another challenge because of a misunderstanding among the field-level officials of the NBR about the latest circular, said a senior official of the revenue administrator.

There should not be any misunderstanding between the importers and customs officials as traders will continue to enjoy the benefit if they follow the rules, he said.

He said importers would have to give the bank guarantee if they could not submit the hard-copy of the CoO.

An amendment to the Safta agreement would be needed if the bank guarantee requirement is to be scrapped, the NBR official said.